Long-Term Macroeconomic Effects of Climate Change: A Cross-Country Analysis

Abstract

We study the long-term impact of climate change on economic activity across countries, using a stochastic growth model where labour productivity is affected by country-specific climate variables-defined as deviations of temperature and precipitation from their historical norms. Using a panel data set of 174 countries over the years 1960 to 2014, we find that per-capita real output growth is adversely affected by persistent changes in the temperature above or below its historical norm, but we do not obtain any statistically significant effects for changes in precipitation. Our counterfactual analysis suggests that a persistent increase in average global temperature by 0.04°C per year, in the absence of mitigation policies, reduces world real GDP per capita by 7.22 percent by 2100. On the other hand, abiding by the Paris Agreement, thereby limiting the temperature increase to 0.01°C per annum, reduces the loss substantially to 1.07 percent. These effects vary significantly across countries. We also provide supplementary evidence using data on a sample of 48 U.S. states between 1963 and 2016, and show that climate change has a long-lasting adverse impact on real output in various states and economic sectors, and on labour productivity and employment.

Dynamics of the impact of COVID-19 on the economic activity of Peru

“…This statement is consistent with the literature review [29][30][31]. Also, there is recent evidence that seems to suggest that climatic conditions may influence the transmission of SARS-CoV-2 [80][81][82], however, there is no robust scientific evidence to conclusively affirm that the virus survives with heat and that The pandemic could lessen with the arrival of higher temperatures [83] and indirectly impact economic activity.…”

“…However, there is little literature and empirical evidence for the short term, associated with Pandemic-type catastrophes such as COVID-19 with its daily dynamics. However, there are studies where epidemiological [26], climatic factors: rainfall [27,28], temperature [29][30][31] and environmental [32,33] are recognized, which emphasize the impact of economic activity. According to the SIR model, it has proven to be a good indicator of the evolution of COVID-19 [34].…”

“…It is hypothetically assumed that there is an inverse causal relationship between temperature and economic activity [27][28][29][30][31]. Climate is considered a relevant variable that is correlated with COVID-19 [80,81], which increases the probability of risk of incidence and contagion [82] and indirectly affects economic activity.…”

Rising temperatures, falling ratings: The effect of climate change on sovereign creditworthiness

“…Leading climate-economy models estimate economic losses from climate change of between 2% and 22% of gross world product by 2100 (Burke et al, 2015;Dell et al, 2014 andKahn et al, 2019). Beyond impacts on aggregate output, the environmental, social and policy consequences of climate change will directly impact firms, investors, and regulators.…”

Reduction in extreme climate events and potential impacts by the use of technological advances

“…Thus, we may expect a similar magnitude of uncertainty in our study, but which should be quantified using multi‐models in future work. Regarding the economic damage, we show that global economic losses associated with climate change may reduce by ∼4–6% under the FTP scenario, which is close to the estimated damages (∼2%) by 2100 under the RCP2.6 scenario (Kahn et al ., 2019). The economic losses are projected to reach ∼22–28% under the NTP scenario, similar to the estimation (>30%) under a 4°C warming scenario (Burke et al ., 2018).…”